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Owner occupied commercial real estate loans

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The benefits of owner-occupied real estate

Read time 3 minutes

Are you looking for a new place to house your business? Or, considering the purchase of the building your office currently occupies? An Owner Occupied Commercial Real Estate loan could be your solution. This type of ownership requires that you and your business occupy 51% or more of the building, which can include common areas such as hallways, HVAC and shared bathrooms.

The Benefits

It’s an appreciating asset. Your rent as a practice owner goes toward paying the debt on the building instead of a third party. This reduction in debt increases your equity and your net worth.

Often times, it can lower your rent payment. With leased space vacancies at an all-time low, lease rates are going for a premium. Depending on the purchase price of the building, a 25-year amortization and historically low interest rates may lead you to find owning less costly than renting.

Tax Breaks. Property ownership comes with additional tax write-off opportunities you would not get with renting. Consult with your CPA for more information.

It increases ease in the sale of your company. Building ownership decreases the risk of having to negotiate with a landlord to reassign or draft a new lease for your prospective buyer.

It’s a great asset when it comes to your retirement and estate planning. Owning a building gives you the opportunity collect a monthly rental income from tenants. You also have the option to sell the building and cash out that equity.

It eliminates uncertainty with renting. Most commercial leases have automatic escalation clauses regardless of economic conditions. Fixed financing options that come with ownership allow you to better budget your monthly expenses.

If you are unsure whether you are in a position to purchase the building you occupy, our SBA team is available to answer any questions you may have about the qualifications required. 

Loan Options

There are several Owner-Occupied CRE financing options if you are considering this type of loan.

A Conventional CRE Loan is best if you have cash to put into the loan immediately. These loans often have the lowest fees and most competitive rates. With that, they are one of the less flexible loan products, require a minimum of 20% down payment and have shorter loan terms and fixed rate periods.

An SBA 504 Loan for CRE Acquisition is a great option for a buyer that is looking for longer fixed rates and terms. These loans have low rates and are a more flexible loan product that can include tenant improvements and equipment funding. They have higher fees, a 10% down payment requirement for most buyers and have stricter prepayment penalties than other options.

A final option to consider would be an SBA 7a Loan for CRE Acquisition. This loan type is excellent for buyers who may not have the cash for a down payment. Although it has higher rates and fees, it is the most flexible loan product as it can include tenant improvement, equipment financing and working capital funding.


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